System and method for electronic transaction settlement

ABSTRACT

A method for electronic transaction settlement includes a customer providing an account identifier and contact information to a merchant, the merchant contacting a settlement house and transmitting the account identifier and a transaction amount, the settlement house contacting the customer, preferably via a mobile communication device. The customer then chooses a payment method such as a credit card and the settlement house contacts a credit provider for authorization. If the settlement house receives an authorization, the settlement house transmits it to the client, who approves the amount. The settlement house then completes the transaction with the credit provider and the merchant&#39;s bank.

FIELD OF THE INVENTION

[0001] This invention relates generally to electronic transactions andmore particularly to electronic transaction settlement.

BACKGROUND

[0002] Customers are increasingly using electronic means to purchasegoods and services. To complete a credit card transaction, merchantstypically no longer make a physical imprint of the card. Instead, amagnetic strip on the card is read by a computer to access thecustomer's credit card number and expiration date. Many people now alsouse debit cards to pay for goods and services, where the transactionamount is deducted from a bank account. Some transactions are carriedout where the merchant has no physical contact with the credit card. Forexample, when ordering goods or services via a merchant's Internetwebsite, a customer typically enters a credit card type, number, andexpiration date into fields of a web form.

[0003] Enjoyment of some goods and services still requires the physicalpresence of the customer, for example dining at a restaurant. In such asituation, if customers wish to use a credit or debit card, then theymust have that card upon their person. For this reason, many peoplehabitually carry multiple cards with them at all times. This increasesthe chances of one or more of the cards being lost or stolen.

[0004] Also, in a restaurant situation, a credit or debit card may beout of the customer's possession for a length of time, when one or morepersons may have an opportunity to copy the card number and expirationdate. It is a significant concern of customers to be able to enjoy theconvenience of using credit and debit cards while minimizing the risk ofunauthorized access to their card numbers.

SUMMARY OF THE INVENTION

[0005] The method for electronic transaction settlement includes acustomer providing an account identifier and contact information to amerchant, the merchant contacting a settlement house and transmittingthe account identifier and a transaction amount, the settlement housecontacting the customer, preferably via a mobile communication devicesuch as a mobile telephone or a handheld computing device.

[0006] The customer then selects a payment method, such as a credit cardor debit card. The customer may have several options to choose from. Thecustomer's communication device transmits the selection to thesettlement house. The settlement house contacts a credit provider or thecustomer's bank for authorization. If the settlement house receives anauthorization, the settlement house transmits it to the client, who thentypically approves the amount.

[0007] The settlement house then completes the transaction with thecredit provider or customer's bank and the merchant's bank. If thecustomer selected a credit card, the credit provider adds a charge inthe transaction amount to the customer's account. If the customerselected a debit card, the customer's bank deducts the transactionamount from the customer's bank account. The merchant's bank credits themerchant's account with the transaction amount.

BRIEF DESCRIPTION OF THE DRAWINGS

[0008]FIG. 1 is a block diagram of one embodiment of an electronictransaction settlement system, in accordance with the invention;

[0009]FIG. 2 is a block diagram of a further embodiment of an electronictransaction settlement system, in accordance with the invention; and

[0010]FIG. 3 is a flowchart of method steps for settling electronictransactions, in accordance with one embodiment of the invention.

DETAILED DESCRIPTION

[0011]FIG. 1 shows an electronic transaction settlement systemincluding, but not limited to, a settlement house 110, a merchant 112, amerchant's bank 114, a credit provider 116, and a customer 118. Merchant112 may be a retail store, restaurant, wholesaler, or any other type ofprovider of goods or services. Merchant's bank 114 may be any type offinancial service provider where merchant 112 maintains an activeaccount. Credit provider 116 is a financial service provider thatprovides a line of credit to customer 118. For example, credit provider116 may have issued a credit card to customer 118. Customer 118 ispreferably an individual consumer, but may also be a representative of abusiness or non-profit organization.

[0012] Settlement house 110 is preferably an entity independent ofmerchant 112, merchant's bank 114, credit provider 116, and customer118; however, in some embodiments settlement house 110 may be affiliatedwith one or more of the other parties. For example, settlement house 110may include credit provider 116. Settlement house 110 preferably hascommunication paths to merchant 112, merchant's bank 114, and creditprovider 116. The communication paths may include an Internetconnection, a PSTN connection, a Local Area Network (LAN) connection, aWide Area Network (WAN) connection, a wireless network connection, or acombination of the above.

[0013] Customer 118 preferably communicates, at least in part, via awireless communication path with settlement house 110. Customer 118 mayuse any type of mobile communication device, including but not limitedto a mobile telephone, a pager, and a handheld computing device such asa personal digital assistant (PDA). Customer 118 may use any type ofinterface to communicate with settlement house 110, including keystrokes, voice commands, or a touchscreen.

[0014] Settlement house 110 manages settlement of transactions betweenmerchant 112, merchant's bank 114, credit provider 116, and customer118. For instance, a purchase by customer 1118 from merchant 112 mayinclude a transaction between customer 118 and credit provider 116, atransaction between credit provider 116 and merchant's bank 114, and atransaction between merchant 112 and merchant's bank 114.

[0015] Customer 118 preferably maintains an account with settlementhouse 110. The account may contain information regarding several optionsfor payment, including a bank debit card and one or more credit cards.

[0016] To initiate a purchase, customer 118 provides contact informationof settlement house 110 to merchant 112. Customer 118 also providesaccount information, such as a name or account number, to merchant 112.Merchant 112 uses the contact information to initiate communicationswith settlement house 110. Merchant 112 then transmits the accountinformation for customer 118 and the purchase amount. Settlement house110 then completes the transaction so that credit provider 116 adds acharge to the credit account of customer 118 and merchant's bank 114records a payment into the account of merchant 112. Further details of atransaction settlement are discussed below in conjunction with FIG. 3.

[0017] Throughout the purchase transaction, merchant 112 does not haveaccess to the credit account number of customer 118, which providesprivacy to customer 118. If credit provider 116 denies the transaction,customer 118 may then select a credit account with another creditprovider (not shown). Customer 118 is thus spared any embarrassment dueto a denial of a credit transaction.

[0018]FIG. 2 shows an electronic transaction settlement systemincluding, but not limited to, settlement house 110, merchant 112,merchant's bank 114, a customer's bank 216, and customer 118. Customer118 maintains an account with customer's bank 216. The account may be achecking account, a savings account, or any other type of bank account.Customer 118 preferably has a debit card with an associated debit cardnumber that allows him or her to pay for purchases with monies from theaccount with customer's bank 216.

[0019] In the FIG. 2 embodiment, settlement house 110 uses the debitcard number to settle transactions with customer's bank 216. Customer118 provides contact information and a name or account information tomerchant 112. Merchant 112 contacts settlement house 110 and transmitsthe name or account information and the amount of the transactions.Settlement house 110 then contacts customer 118 via a mobile telephoneor other communication device. Customer 118 selects a payment method, inthis embodiment the debit card. Settlement house 110 then contactscustomer's bank 216 to request payment for the amount of thetransaction.

[0020] Although not shown if FIG. 2, customer 118 may also selectadditional payment methods. Customer 118 may have an account with afinancial service provider that may or may not be a bank or creditprovider and may select to pay using that account. For example, ifcustomer 118 is a teenager, a parent may deposit an amount of money witha financial service provider who establishes an account accessible bythe teenager. Thus the parent may provide spending money to the teenagerwithout using cash.

[0021]FIG. 3 is a flowchart of method steps for settling electronictransactions, according to one embodiment of the invention. First, instep 310, customer 118 provides identification to merchant 112. Theidentification may include the customer name, an account name or number,or any other type of identification. Customer 118 may also providecontact information for settlement house 110. Next, in step 312,merchant 112 transmits the identification of customer 118 to settlementhouse 110.

[0022] In step 314, settlement house 110 contacts customer 118.Settlement house 110, may place a call to a mobile telephone of customer118, or contact customer 118 via any other type of mobile communicationdevice. Then, in step 316, customer 118 selects a payment method, forexample a credit card, and this selection is transmitted to settlementhouse 110. Customer 118 may have the option of choosing among severalcredit cards or debit cards, depending on his or her arrangement withsettlement house 110.

[0023] In step 318, settlement house 110 contacts credit provider 116for approval of the transaction. Settlement house 110 then transmits theaccount information, for example the credit card number, and the amountof the transaction. In step 320, credit provider 116 approves or deniesthe transaction. If credit provider 116 denies the transaction, then instep 322 settlement house 110 forwards the denial to customer 118. Themethod returns to step 316, where customer 118 may select an alternatepayment method.

[0024] If credit provider 116 approves the transaction, then in step 324settlement house 110 forwards the approval to customer 118, and customer118 approves (OKs) the transaction to settlement house 110. Customerapproval may include an additional amount to add to the transaction, forexample when using a debit card and requesting cash. In step 326,settlement house 110 sends the approval of customer 118 to creditprovider 116, which then adds a charge in the transaction amount to theaccount of customer 118. In step 328, settlement house 110 sends atransaction record to merchant's bank 114, which the credits the accountof merchant 112 with the transaction amount.

[0025] The invention has been explained above with reference to apreferred embodiment. Other embodiments will be apparent to thoseskilled in the art in light of this disclosure. For example, the presentinvention may readily be implemented using configurations other thanthose described in the preferred embodiment above. Additionally, thepresent invention may effectively be used in conjunction with systemsother than the one described above as the preferred embodiment.Therefore, these and other variations upon the preferred embodiments areintended to be covered by the present invention, which is limited onlyby the appended claims.

What is claimed is:
 1. A method for settling an electronic transaction,comprising the steps of: a customer providing a merchant with a customeridentifier; the merchant sending the customer identifier and atransaction amount to a settlement house; the settlement housecontacting the customer; the customer selecting a payment method andtransmitting the selected payment method to the settlement house; thesettlement house sending the transaction amount and customer identifierto a financial service provider associated with the payment method; ifthe electronic transaction is approved by the financial serviceprovider, sending an approval to the settlement house; the settlementhouse sending the approval to the customer; the customer approving thetransaction amount; and the settlement house finalizing the electronictransaction with the financial service provider and the merchant.
 2. Themethod of claim 1, wherein the settlement house finalizes the electronictransaction with a merchant's financial service provider.
 3. The methodof claim 1, wherein the financial service provider is a bank where thecustomer maintains an account.
 4. The method of claim 1, wherein thefinancial service provider is a credit provider that issued a creditcard to the customer.
 5. The method of claim 1, wherein the customeridentifier is an account number.
 6. The method of claim 1, wherein thecustomer identifier is a customer name.
 7. The method of claim 1,wherein the customer communicates with the settlement house via a mobilecommunication device.
 8. The method of claim 7, wherein the mobilecommunication device is a mobile telephone.
 9. The method of claim 7,wherein the mobile communication device is a handheld computing device.10. The method of claim 1, wherein the payment method is a credit card.11. The method of claim 1, wherein the payment method is a debit card.12. The method of claim 1, further comprising the step of: if theelectronic transaction is not approved by the financial serviceprovider, the customer selecting an alternate payment method.
 13. Asystem for settlement of an electronic transaction, comprising: amerchant; a settlement house configured to communicate with themerchant; a financial service provider configured to communicate withthe settlement house; and a mobile communication device operable tocommunicate with the settlement house such that a customer selects apayment method for the electronic transaction and transmits the selectedpayment method to the settlement house, the settlement house settlingthe transaction with the merchant and the financial service provider.14. The system of claim 13, wherein the mobile communication device is amobile telephone.
 15. The system of claim 13, wherein the mobilecommunication device is a handheld computing device.
 16. The system ofclaim 13, wherein the financial service provider is a bank where thecustomer maintains an account.
 17. The system of claim 13, wherein thefinancial service provider is a credit provider that issued a creditcard to the customer.
 18. A system for settling an electronictransaction between a customer and a merchant, comprising: a settlementhouse configured to communicate with the merchant and the customer, thesettlement house communicating with the customer via a mobilecommunication device; and a financial service provider that providesfinancial services to the customer and is configured to communicate withthe settlement house.
 19. The system of claim 18, wherein the customerselects a payment method and transmits the selected payment method tothe settlement house via the mobile communication device.
 20. The systemof claim 18, wherein the settlement house includes the financial serviceprovider.